Confident Meggitt ups dividend as FY earnings climb

Aerospace engineer Meggitt counterbalanced weaker military demand with a stronger performance in civil aerospace and energy in 2013.

Full year revenues rose 2% to £1.64bn, with underlying earnings before interest, tax, depreciation and amortisation (EBITDA) ascending 3% to £479.3m.

Chief Executive Stephen Young hailed the group's continued growth in the face of some operational and end market-related challenges and as a sign of the board's continuing confidence it has increased the full-year dividend 8% to 12.75p.

"We have emerged from an intensive bid cycle resulting in technology sales into a significant number of new aircraft programmes," he said. "Many involve a full suite of Meggitt capabilities, exceeding the shipset content of their predecessors, and the resulting high level of investment in product development and capacity expansion will serve to deliver further good growth in 2014 and beyond."

The civil original equipment market remained "very strong", with deliveries of new aircraft projected to continue to grow, but the civil aftermarket emerged more "slower and lower" than expected from a period of destocking and deferral of maintenance, although organic growth of 3% in the fourth quarter was encouraging.

The military businesses were resilient in the face of a soft market environment with continued uncertainty surrounding sequestration in the US and global defence funding more generally.

Energy markets remained strong although second half revenue was held back by the timing of orders and milestones on some major contracts.

The group has invested in research and development, lifting annual spending there from £122m to £134.9m, as well as facility expansion and manufacturing footprint rationalisation to deliver on its commercial commitments.

Yet it has cut net debt 12% to £564.6, with the ratio to EBITDA down from 1.3 times to 1.2 times.

The group's operational improvement drive, dubbed the Meggitt Production System, has made an "excellent" start since its launch in 2013, according to Young, and has generated improvements in quality and delivery in a number of businesses.

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